The threat of substitutes is the threat from any products which can be used as substitutes of the current products of the industry. If these substitutes have higher quality and are available at lower prices they would pose a threat to the whole industry. Another threat from these substitutes is the development of new technology which might render the current product useless. An example of this is the production of Compact Discs and USB drives which have rendered the traditional floppy drives useless.
The Light Emitting Diode technology is the result of extensive research and development. No major substitutes for Light Emitting Diodes exist currently but the fact remains that the considerable amount of research being done in this area can result in new products and substitutes for Light Emitting Diodes. The efficient and low cost use of electricity plays a major role in this research and could result in alternatives to Light Emitting Diodes and Light Emitting Diode based products in the future. These substitutes will pose a major threat to the Light Emitting Diode industry if the substitutes are offered at lower prices and have higher efficiency. In order to manage the risk associated with substitutes for Light Emitting Diodes continuous research plays an important role as this research would help in increasing the quality and lowering the prices of Light Emitting Diodes for industrial and commercial users of Light Emitting Diodes. The Light Emitting Diode manufacturing companies can fix prices according to the market conditions irrelative of substitute products but when substitutes of Light Emitting Diodes do become available it would affect the prices being set by manufacturers.
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